Use of Blockchain for P2P Lending Platforms

04.12.2018

The global peer-to-peer lending market is expected to reach $1,000 billion by 2025. This forecast, along with hundreds of years of P2P lending history, draws a potentially profitable picture for all fintech enthusiasts. The P2P market is a field of unlimited financial opportunities. And with the rise of cryptocurrency, this field may be even more profitable.

Blockchain P2P platform development is one of the main areas of IT enthusiasts’ interest. The combination of well-established P2P market with cutting-edge technologies is a great idea for a startup and an endless source of profit.

What about the decentralized lending platform? How to get revenue from this type of project? How to implement an idea and prove it’s the best option possible? Let’s talk about it, so you can improve your business too.

Traditional P2P Lending Platform and Its #1 Issue

The P2P lending industry is unique. Its special feature is that both lenders and borrowers profit from the business relations. The borrower gets the needed money securely or services in time. Even with a poor credit history, there is still a chance to get credit. At the same time, borrowers, or those who invest money into the P2P platform, gain real profit from the financial turnover and attractive annual fee. No existing bank will provide you with such profit apart from investing money into the P2P platform.

Another feature of the platform is complete transparency. The cooperation built here is trustworthy and reliable. Both parties have access to the reputation, history or transaction details, etc. Fees are usually fixed, and the requirements and regulations cannot be changed after the deal is signed.

But wait, what about intermediaries? Any software platform that plays the role of intermediary in the P2P process requires a fee. The standard platform is able to influence the terms and conditions of cooperation. And as always, it’s a bit risky to send your money to a third party.

Top 7 Benefits Blockchain Technologies Bring to P2P Market

Unless you’ve been sleeping in a cave for the last couple of years, you’ve heard of blockchain. If you are involved in the fintech world, you know what blockchain means. And if your occupation is connected to P2P deals, you may have thought about P2P crypto lending and its capabilities.

Blockchain-based P2P lending may save you worries, answer troubling questions and eliminate risks. Let’s take a look at the top seven benefits blockchain brings to P2P lending:

Loan Tokenization

Traditional lending is based on debt forms trading. However, if we talk about the lending platform, it’s not that simple. Blockchain enables loan tokenization. Implementing cutting-edge technologies within your platform, you extend user opportunities and allow trading loans between network participants. This is a better way to reach liquidity.

Affordable Fees, or No Fees at All

The financial industry as we know it is full of various fees. Transaction fee, platform fee, service fee, shipping fee, so on – all take our money without actual reasons. Blockchain-based solutions eliminate the additional costs and minimize transaction fees. In some cases, the transaction fee doesn’t even exist. Thanks to this feature, the alliance between P2P lending and cryptocurrency is even more profitable.

Defined Ownership

Keeping your money in a bank is not as attractive as it seems. Your access to your own money can easily be limited by bank regulations. The bank can even freeze your account. Government regulations may have an impact on your money too. The point is, you can never be completely confident about the capital you hold at a financial institution. Digital currencies revolutionize the way you keep your money. With your own private key, you can access your digital account anytime, any place. You can make and receive payments without the involvement of regulators.

Saved Time

International transfers can take a long time. In most cases, the transfer takes several hours to a couple of days, depending on the country, laws, financial organization, and many other factors. The greatest issue is that sometimes the bank can’t tell you the specific date the money will reach the account. With blockchain for the P2P industry, the situation is different. The transfer is almost immediate – in 10-20 minutes the money reaches its destination.

Personal Information Security

P2P lending requires providing sensitive information to third parties. Both borrowers and lenders share their personal details that should be well-protected. Credit card credentials and account details expose you to serious risks. Cryptocurrencies protect you from these risks. Lenders send money directly to borrowers. And no information other than the amount of money is visible to other participants in the deal.

Global Equality

Banks and other financial institutions have built a funnel between citizens of different countries. Several thousands of dollars might be an affordable sum for developed countries. At the same time, lending this amount of money may be difficult in poor countries. Traditional P2P cooperation between representatives of different countries and social groups is time-consuming, painful and unreliable. Blockchain eliminates the differences and offers the same terms and conditions for everyone. Currencies, citizenship, inflation, and economic ups and downs lose their might.

Specifics of Blockchain P2P Platform Development

These points tell you why you should use blockchain for P2P lending platforms. But how can you build a powerful network?

Recently, our team began working on a tool we believe will revolutionize the P2P market. We have carefully defined potential users’ needs and preferences, industry forecasts, and ways to implement our fresh idea.

What processes can the blockchain-based P2P network automate?

Operating with personal or bank accounts

Tracking clients’ actions

Receiving, processing, and tracking loan applications and contracts

Enriching loan applications

Conducting surveys for lenders and borrowers

Calculating profits, rewards, etc.

When deciding to build a P2P lending platform based on blockchain, it is necessary to keep in mind the support services. Blockchain technology is too young, and the financial industry is too sensitive, so we recommend paying particular attention to it.

If you are looking for a blockchain P2P lending network, you may find a lot of such tools. But, before creating an account on one of them, make sure they have a skilled and reliable support team.

If you are thinking over how to build such a network, you had better work on your own expertise. It is not enough to develop a great tool if you have no idea how to support users in various situations.

A high-quality blockchain platform for lending purposes should consist of 9 critical components:

Client component that provides the functionality for clients’ accounting

Open API component that enables interaction of external systems with a core

Resource component with referenced data and system settings

A blockchain platform can blow up your revenue by attracting an enormous number of lenders and borrowers. This is the future of the lending industry.

Final Thoughts

Blockchain creates unbelievable conditions for lending procedure improvement. Lower fees, better transparency, saved time and money, and market expansion are far from being the whole list of the advantages blockchain brings to the P2P market.

Blockchain P2P networks are starting a new era. So more and more investors are turning their heads to this topic. And what do you think about business development in this direction? Let us know what you think about it, and let’s bring your idea to life.